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People are starting to view cybersecurity as a business risk instead of an IT problem, says Arvind Parthasarathi, CEO of Cyence, a three-year-old firm that helps insurers model cyber risks. That means recognizing this is not a problem with a clear solution, but a risk that can be managed, though not eliminated. Now, says Parthasarathi, executives are asking, "How much risk am I comfortable keeping?"

Insurers are asking the same question as they try to determine how to price new cybersecurity policies. The modern cyber threat is complex and rapidly evolving. The most pressing challenge is quantifying the risk of a cyber catastrophe hitting many policyholders at once, estimating the maximum loss in the worst-case scenario. That's what insurers failed to do before Hurricane Andrew. [Which caused some insurance companies to fail.]

A cyber disaster comparable in scale with Hurricane Andrew is hard to model in part because one hasn't happened yet. Last October, we got a glimpse of one way such a calamity might unfold when hackers used a network of commandeered webcams, DVRs, and other Internet of things devices to launch a massive denial of service attack on Dyn, a major router of Internet traffic. [...] The cost of the Dyn attack is not yet clear, but a recent four-hour outage of Amazon's S3 cloud storage system (which was not the result of a cyberattack) cost S&P 500 companies at least $150 million, according to an estimate from Cyence. It is not hard to imagine a large-scale attack on a cloud service causing billions in losses.